Last month, the new Federal Trade Commission chairman Andrew Ferguson announced a new task force aimed at investigating behavior that harms workers. Although much of the focus seemed like a retread from previous chair Lina Khan, a renewed scrutiny of occupational licensing is welcome news.
Occupational licensing directly affects more than one in five workers, but costs all of us in terms of less choice, higher prices, and reduced service innovation. By making it a crime for aspiring workers to enter a new profession without completing state-mandated minimum levels of education and training (nearly always established by existing professionals without rigorously considering consumer safety or welfare), consumers pay the price of this artificial reduction in service provider supply.
In addition to these significant costs borne by both aspiring workers and service consumers, occupational licensing also restricts mobility from state to state. Unlike driver’s licenses, which typically transfer easily when US citizens move to a new state, occupational licenses typically do not transfer. Nurses, cosmetologists, librarians, architects, therapists, landscapers, and millions of other professionals will be unable to work their new home state unless they complete additional training, pass new exams, and pay required fees. Research by Janna Johnson and Morris Kleiner finds clear evidence that licensed workers in occupations with state-specific requirements are seven percent less likely to move than their peers.
Addressing this friction has been a priority of administrations going back to President Obama, who deserves credit for bringing renewed attention to this often-overlooked issue. How can state policymakers fix this barrier to mobility and full employment?
The best approach is simply eliminating unnecessary licensing. While necessary to some extent, licensing in the US today goes too far. Licensing is very costly to consumers and aspiring workers and should only be used as a last resort and to prevent serious harms. If a state uniquely licenses an occupation, the license should be eliminated. Although it was laughable that Louisiana required florists to have state licenses, the law had real consequences for real human beings. Louisiana rightly eliminated florist licensing last year, but remains one of only a handful of states to license interior designers. Licensing seems an awfully heavy-handed regulatory approach for, say, the hairstyling industry. Where is the proof that more than a thousand hours of training is necessary to cut and style hair?
Continue reading at The Daily Economy.
Edward Timmons, PhD, is a senior fellow at the Archbridge Institute and a service associate professor of economics and director of the Knee Regulatory Research Center at the John Chambers School of Business and Economics at West Virginia University. He is regularly asked to provide expert testimony in state legislatures across the US on occupational licensing reform and the practice authority of nurse practitioners. His work is heavily cited by the popular press, and he has authored numerous articles for media publications.
Economics of Flourishing
Last month, the new Federal Trade Commission chairman Andrew Ferguson announced a new task force aimed at investigating behavior that harms workers. Although much of the focus seemed like a retread from previous chair Lina Khan, a renewed scrutiny of occupational licensing is welcome news.
Occupational licensing directly affects more than one in five workers, but costs all of us in terms of less choice, higher prices, and reduced service innovation. By making it a crime for aspiring workers to enter a new profession without completing state-mandated minimum levels of education and training (nearly always established by existing professionals without rigorously considering consumer safety or welfare), consumers pay the price of this artificial reduction in service provider supply.
In addition to these significant costs borne by both aspiring workers and service consumers, occupational licensing also restricts mobility from state to state. Unlike driver’s licenses, which typically transfer easily when US citizens move to a new state, occupational licenses typically do not transfer. Nurses, cosmetologists, librarians, architects, therapists, landscapers, and millions of other professionals will be unable to work their new home state unless they complete additional training, pass new exams, and pay required fees. Research by Janna Johnson and Morris Kleiner finds clear evidence that licensed workers in occupations with state-specific requirements are seven percent less likely to move than their peers.
Addressing this friction has been a priority of administrations going back to President Obama, who deserves credit for bringing renewed attention to this often-overlooked issue. How can state policymakers fix this barrier to mobility and full employment?
The best approach is simply eliminating unnecessary licensing. While necessary to some extent, licensing in the US today goes too far. Licensing is very costly to consumers and aspiring workers and should only be used as a last resort and to prevent serious harms. If a state uniquely licenses an occupation, the license should be eliminated. Although it was laughable that Louisiana required florists to have state licenses, the law had real consequences for real human beings. Louisiana rightly eliminated florist licensing last year, but remains one of only a handful of states to license interior designers. Licensing seems an awfully heavy-handed regulatory approach for, say, the hairstyling industry. Where is the proof that more than a thousand hours of training is necessary to cut and style hair?
Continue reading at The Daily Economy.
Edward Timmons
Edward Timmons, PhD, is a senior fellow at the Archbridge Institute and a service associate professor of economics and director of the Knee Regulatory Research Center at the John Chambers School of Business and Economics at West Virginia University. He is regularly asked to provide expert testimony in state legislatures across the US on occupational licensing reform and the practice authority of nurse practitioners. His work is heavily cited by the popular press, and he has authored numerous articles for media publications.
Share:
Related Posts
Why Classical Liberals Should Be Skeptical Of DOGE
Early Americans Recognized Occupational Licensing Was a Racket
A Mountain to Climb: How to Improve Social Mobility in West Virginia